What Will Turn Costlier Amid Geopolitical Tensions?

While countries have come to help Ukraine, the crisis between Ukraine-Russia is far from over and in fact as per reports there are estimates that the conflict would even worsen. So amid such a stance, while we have already see crude prices move past key $100 per levels, the disruptionary supply chain effect will also lead to increase in prices of various commodities that include:

Crude oil price hike to make auto fuel dearer very shortly: As and when the polling in key states concludes, oil marketing companies will have to align fuel rates in accordance with the global rates. Oil prices have come down a tad bit to levels of $97.93 per barrel for the Brent benchmark.

Sunflower oil: India is the key importer of sunflower oil from Ukraine and Russia and amid it supply chain disruption, prices shall be impacted hugely. But the case or impact shall be limited as consumers can switch to other edible oils. Though supply gap may result in higher prices, there is even reported high harvest in the country.

Wheat prices: Both of the country's currently into conflict account for 30% of the world's wheat export; any more supply disruption will result in cascading effect and in turn the staple commodity shall inch higher in price. India is self-sufficient in wheat but any increase in rates overseas shall also influence rates in the domestic markets. And hence all of the products with wheat as the ingredient shall turn costlier including bread, wheat flour, biscuits etc.

Also, as supply shall be affected in these nations, there will be demand coming in from there and hence we may see wheat price rise in India, notes Parle Products.

Corn: Likewise, corn trade is majorly accounted for by these nations at 20% and hence it shall impact the prices in case of weak production or supply disruption.

Palm oil prices will raise price of FMCG goods: Given the rift, palm oil prices also saw the biggest single day rally in 6 months due to the collateral result of the geo-political tensions. And as palm oil price is majorly imported by India all of the FMCG products that make use of palm oil such as skincare products, soaps, packaged foods will get dearer. Also, with the rising crude costs, packaging and logistics cost for these FMCG players shall also be increased.

Disruption in barley supply will also make beer dearer: These two countries into conflict are also one of the leading producers of barley- a key component in beer making. This shall be again a cascading impact for India as the country meet its requirement locally. Though the pricing of alcoholic beverages are regulated by state governments any change in the same shall take time to be implemented. Nonetheless, manufacturers in the area will see margin pressure.

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